I turn dials and fiddle with knobs to hone in on harmonic rotations
Joined Oct 26, 2011
3,748 Blog Posts

IndexModel signals bullish into OPEX but expect some chop

Once a year about 100 people from Detroit ascend up into a small town in northern Michigan and essentially take over—infiltrating the weekend market with urban brands and overrunning the hospitality staff at all motels, hotels, and restaurants.  Some locals tend not to fare well, especially if they take to the drink along with the seasoned degenerates of Motown.   I joined the large pack of marauders for a few days, and now I am in the woods where I have taken up living in my van which has been parked near a river.

But before I commence several days living in the woods, thinking, I connected to Mothership and updated IndexModel.  It flagged bullish but is not calling for a strong rally. Nope.  Just a drift sideways perhaps with a slight upside bias.

There are four weeks a year that I do not trade and the upcoming week is one of them.  Several of the algorithms I’ve build to augment my discretionary trading of NASDAQ 100 futures are volume dependent.  The issue is, despite most active traders moving ahead to the December contract last Thursday, there is still a significant amount of volume taking place on the September contract.  Also, lots of the activity taking place in this upcoming week involves ‘rolling forward’ large institutional positions that must be migrated from September to December.  It all sums up to a great bit of fuckery if you ask me.  The algorithims tend to fire off bad signals which forces me to cross-check their behavior.  This introduces a bit more on the fly judgement calls than I am comfortable with, especially as I become older.  Some of the worst scars on my trading career came from on the fly trades during OPEX.

So while I am bullish, I have taken to the woods to avoid my brain’s desire to make sense of institutional shenanigans, and my ego’s tendency to want to ‘beat’ these institutions.  In the book Zero to One, Peter Thiel writes, “All failed companies are the same; they failed to escape competition.”  On the surface that is annoying to me—because my business is trading futures and I will always have competition.  If there were no competition that would mean I had nobody to trade with.

But looking at it again, and thinking about it, it can be reframed.  The simplest way to ‘escape competition’ is to not trade at all.  If I know there is a high likelihood of me competing with participants that seriously outgun me or simply have different goals in their activity on the exchange, then I can succeed by waiting for them to do what they need to, then stepping back in when I have my proven edge.

And that is what I intend to do this week—photograph birds instead of forcing myself to behave inside Mothership where there is an almost ritualistic tendency to trade the opening bell.

To those of you trading this week, I share my robotic bias, it is bullish.  The model does not expect rambunctious upward movement.  Just a drift.  Given the OPEX context, I’d expect this ‘drift’ to be choppy and violent.  These could be good conditions of trading individual stocks but that is never my game.  Mostly next week is about sucking the theta out of trades taken with an overly ambitious expectancy of time being on your side.

Time flies when you options are 5% out of the money.

So stay alert out there.  If you need me send a smoke signal on Twitter.


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